In the realm of elder care, a child who resides in their parent’s home and provides the care, assistance and supervision needed to enable the parent to remain in the community is typically referred to as the “caregiver child.” Sometimes — oftentimes — the child is giving up other jobs or income in order to provide this caregiving. Frequently the parent wishes to compensate the child in some way. Tread carefully if you are arranging for such payments. There are a host of issues to be aware of particularly if the parent needs to apply for governmental benefits.
The Veterans Improved Pension and Aid & Attendance programs include payments to in-home caregivers within the category of health expenses that qualify as Uncompensated Medical Expenses (UME’s) which can be offset against the income to reduce it to the required level for eligibility, called MAPR or Maximum Annual Pension Rate. The documentation is simple. Form 10-2410 is submitted with the application, showing the monthly rate of pay and the start date of the services. http://www.benefits.va.gov/pension/ No particular formal employment contract is required.
Within the Medicaid Program, payment to family members for providing home care services are presumed to be a gift, rather than a wage — even if the child reported the wages to the IRS on her 1040 — unless a contract was entered into before the payments began. The written agreement must specify the services to be provided as well as the rate of payment. If the wage isn’t an amount comparable to the prevailing market rate, the agency tends to view it as an uncompensated transfer or “gift.” The regulations don’t define just what amount of wages would be acceptable. The rule can be found at N.J.A.C. 10:71-4.10(b)6.ii. It is generally a good idea to create a detailed employment contract when setting up these kinds of arrangements. Otherwise, when a Medicaid application is filed and they do their 5-year lookback, there is a risk of a transfer penalty being imposed for the payments that were made to the caregiver
After-the-fact payment for caregiving is treated as a gift under the Medicaid program. However, there are provisions for one type of permissible after-the-fact compensation for caregiving. The rules allow a penalty-free transfer of the residence to the child who resides with the parent and meets the criteria of “caregiver child.” Detailed documentation should be developed to substantiate that the child meets all of the criteria, and that the parent required those services to remain in the home.
Note that a grandchild cannot be a “caregiver child” and receive the house — but they can be paid on an ongoing basis as a household employee and should enter into a written employment agreement as noted above.
For advice on structuring, proving or appealing denials involving in-home caregiver arrangements in connection with Medicaid eligibility, contact us at 732-382-6070